Senate Finance Committee testimony

Today (April 15, natch) was the day. Here is the link to my full written testimony. The three main points I covered were base-broadening, rationalizing business taxation, and filing and compliance simplification for lower and middle class taxpayers.

In some other parallel universe, I will tell my enthralled grandkids "Yep, I was the lead-off witness at the first Senate Finance Committee hearing that led to the great Tax Reform Act of 2009." Not as likely, alas, in the one we actually inhabit. While I would settle for the universe where it happens except for the realistic detail that the grandkids don't care, I don't think we are in that one either.

Turnout by the Senate Finance Committee members exceeded the insiders' over-under, totaling 7 at the peak. Someone had forecast only 5 because the farm bill was in conference, or something like that. Senator Baucus, the Chair of the Committee, showed up for a bit despite the farm bill because he wanted to make the point that tax reform is a big priority for him. Others who asked questions included Bingamon, Wyden, Kerry, and Bunning. Occasionally a question would take the form of "Isn't it true that my bill, which I already know you like, would be a good idea?" At one point I leaned over and whispered to Michael Graetz: "Objection, leading the witness." But other questions had more of an information-evoking flavor, I suppose.

The panel had a lot of consensus, except that Jason Furman questioned studies Graetz and I mentioned suggesting that these days the incidence of the corporate tax may fall on labor due to international capital mobility. And Jason spoke up for traditional capital export neutrality, which Graetz noted is in question these days after I had ducked the question a bit by noting the proposal (by economists Rosanne Altshuler and Harry Grubert) to enact a "burden-neutral" repeal of deferral, thus keeping overall U.S. tax burdens on outbound investment about the same but without all the wasteful tax planning associated with playing deferral or subpart F games.

I'll confess that I thought for a second of Robert DeNiro in "Analyze This!" saying to a petrified Billy Crystal that "I'm going to be seeing a lot of you!" when a couple of our hosts made the same suggestion to us in connection with the possibility that Congress in 2009 will be seriously pursuing fundamental tax reform. But there really doesn't seem to be much buzz about the topic even though the stars arguably are aligning in various ways (rising AMT liability, expiring tax cuts, etc.).

One thing I could imagine them taking up, however, is simplification for lower and middle class taxpayers, meaning greatly eased filing. This has some aspects of win-win, although inevitably some people's taxes would go up if the substantive law changed in a revenue-neutral fashion. It is bound to have foes however done, but has the potential (for once) for politicians to score points because they actually deserve to. I am reminded of the fact that renewing driver's licenses used to be an excruciating experience and then was made simple. Not all that unrealistic an analogy for most wage-earners' tax returns, albeit not entirely lacking in tough choices.

James Banks and Peter Diamond weigh in on the income vs. consumption tax debate

Economists James Banks of University College, London, and the renowned Peter Diamond of MIT have posted a new paper, called "The Base for Direct Taxation."

The abstract says in part:

"The essay presents the Atkinson-Stiglitz and Chamley-Judd results that capital income should not be taxed, but concludes that the required conditions are too restrictive and not robust enough for policy purposes. Hence there should be some role for including capital income as a part of the tax base. The essay discusses some empirical underpinnings for two key elements in the conclusion - differences in savings propensities and the shape of earnings (and uncertainty about earnings) over the lifetime. The conclusion that capital income should be taxed does not lead to the conclusion that the tax base should be total income, the sum of labour income and capital income."

I couldn't resist forwarding a copy to my good friends Joe Bankman and David Weisbach, since the paper appears to line up more on my side than theirs in our recent exchange in the Stanford Law Review. But that is not to prejudge what effect, if any, a careful reading would have on one's assessment of the overall merits (and in truth my position and theirs are pretty close - we both would favor a progressive consumption tax, holding constant the political implementation variables).

Tax filing

I'm done, but I didn't make it under the wire by very much. I use Turbo Tax, as doing it by hand would be intolerable (think of the AMT alone, or for that matter leaving one item out of adjusted gross income and then, once one finds it, having to do umpteen calculations all over again).

Kind of an unpleasant process, haunted by fear that I am forgetting something, and subject to the usual feelings of being glad to get a refund or sad to still owe $$ even though in principle only the total paid really matters (leaving aside the time value of money on the one hand and penalties for under-paying on the other).

Turbo Tax appears to have screwed up this year by not automatically dealing with New York State estimated tax for next year. Had to do that myself. I am not well inclined towards them in any event, given their odious behavior in the Ready Return fight in California (where they raised bogus arguments to help kill a program that would have given Californians for free, at a state government cost of pennies, a set of services that Intuit would rather sell for $50).

Official witness list for my Senate Finance testimony next week

The panel, meeting on Tuesday, April 15, at 10 a.m. in room 215 of the Dirksen Senate Office Building, has the title "Tax: Fundamentals in Advance of Reform." The witness list (order as given in the listing I saw), is as follows:

Daniel N. Shaviro, Wayne Perry Professor of Taxation, New York University School of Law, New York, NY

Michael Graetz, Justus S. Hotchkiss Professor of Law, Yale Law School, New Haven, CT

Jason Furman, Director, The Hamilton Project, Brookings Institution, Washington, DC

Robert Carroll, Vice President for Economic Policy, The Tax Foundation, Washington, DC

Tax policy colloquium on "Long-Term Objectives for Government Debt"

At yesterday's NYU Tax Policy Colloquium, my past and future co-convenor Alan Auerbach presented "Long-Term Objectives for Government Debt," a paper he wrote for a conference in Sweden (arranged by a new government entity there, the Swedish Fiscal Policy Council).

Whew, this is going to be a tough one, I thought, when I saw the first page, which starts: "Finanspolitiska radet are en myndighet som har till uppgift att gora ... " etc. Okay, just kidding there. That actually is the first bit after the title page, but it comes from the soon-to-be-published book's credits, and it's the only part that's written in Swedish rather than English.

Alan identifies the three main issues associated with budget deficits and public debt as generational equity, economic efficiency or performance, and fiscal sustainability, which he identifies with a possibility of a fiscal disaster such as default or hyper-inflation. (The fourth big issue is its political economy effects, mainly reflecting political incentives to (a) defer and/or under-specify financing for government outlays and (b) pre-commit future governments' budgets because they may not share one's currently ascendant priorities. I quibbled a bit about Alan's list, notwithstanding that I have used exactly the same list in some of my writing. (Consistency being the hobgoblin of petty minds, after all.)

On generational equity, Mihir Desai argued, and I tend these days to agree, that, while the issue is important and while better information about government policy is surely welcome, it is hard to say how the policy we are actually following compares to the optimal policy. We know so little about future generations' circumstances relative to our own, and about the actual marginal costs and benefits of shifting consumption opportunities one way or the other. Sustainability, not generational equity, is actually the big enchilada so far as telling us that U.S. fiscal policy is on a dangerously bad path is concerned.

On economic efficiency or performance, I did the quibbling. As I define this category, there isn't a lot of efficiency at issue in the standard microeconomic sense. There are stabilization / counter-cyclical fiscal policy issues, though unfortunately deficits provide a poor measure given that the composition of tax and spending changes is so important (e.g., transfers to people with high versus low propensity to consume, rewarding existing investment versus new investment). And there are issues of effects on national saving, although again here composition is important and the main complaint, if fiscal policy reduces national saving, is a positive externalities story about saving.

Alan also puts in category 2 issues of tax smoothing, or having more constant tax rates over time rather than having to raise them suddenly because one has finally woken up to the sustainability problem if taxes aren't adequate over the long run given spending levels. At the risk of being a nitpicker, however, I put this in category 3, sustainability issues.

Alan views the sustainability issues discontinuously, in terms of the very real risk of a big meltdown or credit event along the lines of a run in the bank. I agree that this is the really big and growing risk or concern about our unsustainable fiscal policy - explicit or implicit default, hyper-inflation, collapse of the banking system, and so forth. As I say in Taxes, Spending, and the U.S. Government's March Toward Bankruptcy, this actually might happen, and indeed it verges on certainty of happening IF the U.S. political system can't function adequately. (It usually has in the past, but the last seven years make one a bit less optimistic.) But I would include in this category, because they are merely lesser versions of the same problem and have the same cause, lesser versions of the harm caused by deferring any serious response to sustainability problems. Examples include:

(a) foregone tax smoothing, leading to unduly high and distortionary taxes or tax rates in the future because we didn't raise them more moderately sooner,

(b) foregone consumption smoothing, such as from steep Medicare cuts in the future that cut more into essentials because more moderate cuts, hitting less vital and valuable services, weren't imposed sooner, and

(c) tough times for future elderly people whose benefits are cut late in the game, when they can no longer react by saving more, leading to their own accentuated failures of lifetime consumption smoothing.

Anodyne though it may sound, this can actually involve really bad stuff that was completely avoidable. And again, we basically agree about all of this - more of a semantic debate regarding how to conceptualize it.

We also struggled with tough questions of fiscal measurement that lack good answers and probably always will. The fiscal gap - say $80 trillion or about 10 percent of the present value of all expected future GDP (these numbers are made-up, but probably within the realm of a reasonable estimate) - sounds alarming, but strictly speaking is just a statement about statements; that is, a measure of the degree to which a reasonable projection of the current policy path actually is impossible and will not happen. Mere words don't automatically hurt, however. Thus, in thinking about the problems (such as fiscal meltdown risk) implied by the fiscal gap, we need to think about softer variables such as degrees of pre-commitment or lost flexibility.

For example: Joe Stiglitz projects an Iraq war cost of $2 or 3 trillion. Medicare prescription drugs has an infinite horizon revenue cost of more than $20 trillion. But these two numbers aren't entirely comparable, because the Iraq costs are largely water under the bridge - little we can do about them now - whereas we could actually back off spending all that money on future Medicare prescription drugs. This is a point about irreversibility, not about present value or risk / variance. Alan's article introduces a couple of concepts such as "implicit liabilities" and "deferred tax assets" that attempt to advance thinking about these issues - which I agree they do, although this post is already too long for full further discussion to make sense here - but in dealing with soft variables through the medium of a fiscal measure we will never be entirely satisfied. And, how we think about something such as the Medicare prescription drugs dollars (assuming one agrees about the remaining flexibility) does in part depend on whether one is thinking more about fiscal meltdown issues or broader smoothing / optimization issues.

Ray Davies concert

Last night, after a very full day devoted to intensive labor on my Senate Finance testimony for next week plus sundry internal NYU matters, I returned home feeling a bit beaten down ("It's hard work," as Bush would say) but with an evening event on my schedule - a Ray Davies concert at the Beacon Theater.

How au courant to be going to such a concert, some of my NYU colleagues said. Not that I was trying to be. Better just to rest after a day of long hard slogging, if that were the goal. But another colleague, who actually is somewhat au courant, used instead the word "old-fogeyish" to describe going to such a thing. (Had he seen the audience in the orchestra section of the theater he would have felt entirely vindicated.) But my true reason for going was that I hoped the concert would be interesting and fun. It was - and I felt really revived afterwards.

The biggest surprise, though I suppose it shouldn't have been, was what a showman, as well as a hungry sponge for audience acclaim and approval, Davies proved to be. Also seemingly a genuinely nice man, although that isn't the standard formula for a rock 'n' roll lead singer (and on-stage appearances can surely be deceiving). There's so much depression, scorn, and paranoia in some parts of his songwriting canon that I was expecting something a bit different. (Maybe I was succumbing as well to the romantic myth of the lonely, suffering artist.) Obviously lots of other parts of his canon express something very different than this (e.g., Days and Waterloo Sunset). But one could see how integral to his overall set of drives were his fifteen plus years (from the early 70s on) of playing dreadful arena rock so as to "give the people what they want" (as one of his album titles put it).

So there he was, actively seeking sing-alongs on all the old Kinks hits, coming back on stage when the show seemed to be over because he wanted to do just one more number, then doing another one after that, thanking the crowd, mourning the Kinks, throwing repeated verbal bouquets to the guitar playing of his estranged brother Dave, praising his current band and asking if we liked them too, etcetera.

More needy than smarmy, however. And he's still a great singer as well as one of the premier rock songwriters, with his trademark plaintive but indelible minor-key hooks that only the Beatles could really do as well. (That plus the articulate lyrics, ability to capture moods, and the memorable power-chord runs that others such as the Who stole from him.) No other songwriter from that era has come close to his recent writing except for Dylan, who still sets his own standard but really just on Modern Times.

Almost all Kinks in the first set (although two from his first solo release), then after the intermission five or so cuts from the new album starting out acoustic then returning to the full band, and finally a mix of old classics with more new stuff. Almost all of his Kinks material was from the band's first 3 or so years. Nothing from Village Green unless you count Days (which is from the same era and is on the extended reissue but not the original album). Only 3 songs from the 70s and 80s, which (Lola excepted) was a mercy. And the new material really did stand up to the old although perhaps not quite as rousing.

NYU hiring

We've now gone public on the fact that Mitchell Kane is joining the NYU law faculty. Mitch is a rising star in the international tax field and has things to say about, among other topics, recent convulsions in international tax policy thinking about the worldwide and national welfare considerations that underlie optimal (whether or not actual) rule design. I'm very glad to have him here.

NYU Tax Policy Colloquium on "Making Social Security Work"

Last Thursday at the colloquium, Jonathan Barry Forman of U Oklahoma Law School presented (or, given our format, responded concerning) "Making Social Security Work," a chapter from his recent Urban Institute Press book, "Making America Work."

The chapter describes the Social Security fiscal crisis - which some people call large, others small, even when they agree about its actual size (a bit like arguing about whether a spill on the floor is big or small - what the heck, either way at some point we'll have to wipe it up). It offers this as motivation for fixing the system to have a level-one demogrant for seniors plus a level-two individual account, in lieu of the current benefit structure.

As Mihir Desai noted in the discussion, one could fix the Social Security fiscal gap without fundamentally changing the structure. (A bit later retirement, a bit higher payroll tax rate or ceiling, a bit slower benefit growth relative to wage levels, etc.) Or, one could change the fundamental structure, if one likes a different one better, even in the absence of any long-term fiscal problem.

More quibbling: In terms of the book's idea of rewarding, or at least not overly penalizing, work, penalizing it is basically what the fiscal system does in light of its basic distributional aim of treating Bill Gates as better-off as the readers of this blog, and them in turn as generally better off than homeless individuals. A consumption tax burdens work, as does an income tax or any other plausible base. Sure, there are some silly Social Security features that needlessly discourage work, such as the treatment of earnings by people age 62 to 66 if they have selected early retirement, or arguably the lack of a clearer tax-benefit link in the system (so that the marginal burden it imposes on work arguably seems higher than it actually is). Fundamentally, however, discouraging work up to a point is the name of the game. Why select it as a key consideration here?

Somehow, the conversation ended up devolving into the good old income tax versus consumption tax chestnut that has occupied us so often in past years' sessions (though for this year, it was a first). Forman argued that using general revenues (and thus the income tax) is more efficient than payroll tax financing because it covers a larger percentage of GDP. But, insofar as that reflects the difference between an income and a consumption tax base, one must keep in mind the tax policy and economics literature's recent finding that an income tax is likely to be less efficient because its burdening savings on top of work does not mean that it burdens work any less. Just because GDP happens to be an income measure doesn't mean we should think about efficiency in terms of the percentage of GDP covered. It's true that the income tax also reaches wages in the economist's sense that are not legally wages for payroll tax purposes. But then again it is also true that the existing income tax base has more preferences built into it than the payroll tax base (they share the preferences for fringe benefits and such, but the income tax has lots more such as home mortgage interest et al). So anyway, why should we think that income tax financing would be better? (Rate structure is a separate point.)

Anyway, just speaking for myself, I didn't think I came out of the day knowing all that much more than I had going in. But it was a lively and interesting session.

Forthcoming testimony

I've been invited to testify before the Senate Finance Committee on April 15, from 10 am to noon, regarding tax reform basics.  More details to follow, but the panel seeks to lay the groundwork for thinking about fundamental reform of the income tax variety that in theory might start taking shape next year.  I'm not convinced anything will, but certainly there are enough ticking time bombs out there, such as the expiring tax cuts, rise of the AMT, and exploding deficits (if, unlike the Bush Administration, we are sufficiently unsporting actually to count everything).

Others on the panel will include Michael Graetz and, most likely, an economist thought to represent more conservative views (though conceivably the three of us will agree a whole lot more than the audience expects).  This will be a hectic day - by 6 pm the same night I need to be back in NYC discussing tax policy on a panel that includes both a Heritage Foundation flat-taxer and someone apparently associated with Bill Gates, Sr.'s bid to save the estate tax.  Plenty of disagreement to go around there, I suppose.

Also by April 15, I'm pretty sure there's something else I'm supposed to have completed and filed.  If only I could remember what it is.

Yes, it's April Fool's Day, and no, I wasn't born yesterday

Earlier today I got the following e-mail:

"Dear Professor Shaviro:

"We represent a very small but very wealthy nation that has asked us to approach you. This nation is about to launch a revolutionary effort to adopt some of the values of countries that have been developed economic powers throughout recent history. In particular, this nation’s ruling family is interested in a modern and explicitly progressive system of taxation.

"The ruling family is acquainted, in some cases directly, with your thinking. We (my organization is resolutely obscure, but we did great deal of research to identify you) and they have identified three candidates in total to approach: you and one other from the United States, and one from Norway.

"While the intellectual challenge of designing a system of taxation from scratch would be of the highest order, the compensation alone would be enticing. For your time in consultation amounting to let us say some 500 hours, perhaps concentrated in the summer, something in the very high six figures seems appropriate, with the possibility of a continuing relationship.

"To date, revenue from this nation's resources has made progressive taxation unnecessary, and that state of affairs continues. The family’s motivation is not to find more funding, but rather to embark on a approach that embodies concepts of economic justice that we believe you understand and can apply.

"If this opportunity interests you in any way, we would appreciate the chance to meet with you in person. You should be advised that the ruling family, while moving toward Western values in many ways, appreciates what they consider a dignified appearance: coat and tie (or burnoose), highly polished shoes or boots, carefully combed hair, and so on.

"We look forward to hearing from you."

[Followed by organization name, Wall Street address, and 800 number.]

Okay, let's get this straight. On April Fool's Day, someone simply cold-e-mails me to offer close to a million dollars for doing what all academics ostensibly dream of - getting to play philosopher king. I guess I'd better get my burnoose cleaned and pressed.

What I actually did, just out of curiosity, was (a) google the supposed organization and draw a blank, and (b) have my secretary call the 800 number, which turned out to be a porno line.

At least they didn't ask me for $10,000 or my private security codes. But I guess that million-dollar payday for getting to play philosopher king will just have to wait.

New publication

An article of mine from late 2006, "Disclosure and Civil Penalty Rules in the U.S. Legal Response to Corporate Tax Shelters," has finally been published, in Wolfgang Schon (ed.), Tax and Corporate Governance.

On second thought, if you press the link you'll see that Amazon lists it as coming out later this month.

As it is a bit pricey, anyone interested just in my chapter should e-mail me off-line.

Ready for the 80s?

I'm starting to think I'm not, or at least not ready enough to purchase the new B-52s and R.E.M. albums.

NYU Tax Policy Colloquium on "How Americans Think About Taxes"

Last Thursday at the colloquium, MIT political scientist Andrea Louis Campbell presented a couple of draft chapters from her forthcoming (but still in progress) Princeton University Press book, "How Americans Think About Taxes."  Once again, as when we had a paper by Carnegie-Mellon political scientist Christina Fong last year, a session with a political scientist outside our usual circles here at the colloquium proved to be a big success, intellectually broadening for all concerned, and fun.

The piece of the book that we saw has two distinct things going on: attempting to explain the determinants of Americans' changing attitudes towards taxes without regard to how this affects political outcomes, and exploring why tax progressivity has recently (at least in the last 7 years) declined.

For the former, Campbell, while still weighing aspects of her approach, at present uses "perceived cost-benefit theory," an adaptation of rational choice theory that takes into account how taxes' form and structure can dramatically shape perceptions wholly independently of substance.  I was basically okay with this, although her use of the perceived benefit side can be (and was) questioned.  Others argued that ideology plays a bigger role than she gave it credit for.

As the paper acknowledges, rational choice has a tough road to hoe in public policy even if one believes it governs behavior in, say, financial markets, given the voting paradox.  If it isn't rational, in a narrowly economic sense, for me even to inform myself (much less vote) in a mass society where I can't significantly affect the outcome, then we may be using the wrong theory.  What makes self-interest almost work a little better here is that people have some inclination to believe that things that are good for themselves are also good policy.  I attribute this to the Pleistocene incentive to be self-interested yet genuinely convinced of the broader merits when arguing "policy" (e.g., where should we go tomorrow) with the other hunter-gatherers.  But there is no evolutionary impetus to deploy one's most advanced cognitive tools and efforts to solve complicated problems that one has no power to decide anyway.

Insofar as rational choice (almost) works in spite of itself with respect to simple choices that would unmistakably be better rather than worse for oneself, it may seem paradoxical that the median voter has let the system become so much less progressive in the last few years.  No policy judgment about optimal progressivity is needed for one to posit that most voters would rather have rich people pay a bit more tax if this meant that they themselves could pay a bit less.  But this basis for considering reduced progressivity paradoxical would only apply in a zero-sum framework, where all current voters are paying a fixed amount of tax and the question is who will pay more and who less.  When you can simply run up the tab at the expense of future generations, as the Bush Administration has done, then current voters both (a) have no reason to bother figuring it out any more (especially if agenda control means they aren't comparing it to alternative changes that lose the same revenue) and (b) could rationally say fine, I don't care about future generations.

So perhaps there is no paradox after all, even leaving aside the role of ideology, normative issues, complicated tax incidence questions, and changed worldwide economic conditions ithat arguably reduce the optimal level of progressivity from where it was 40 years ago.

My version of Amy Winehouse

They say I got to go to rehab, I say "No, no, no"

First it's my knee and then it's my hamstring, ow, ow, oh

My elbow's still inflamed, can't play no tennis game

And still I have to go to rehab, I just go, go, go.

I'd much rather get to play

Than spend thirty minutes every day

Cause there's nothing, there's nothing getting better

It seems like I'll never be okay

But they say I got to go to rehab, I just go, go, go

I used to play lots of squash

But then that got the kibosh

They say I have to go to rehab, I just go, go, go

I ain't got the time, and if I gave up I'd be fine

But if I want to play again it's rehab, so I say, ow, ow, oh.

And all I do is go to rehab, saying "No, no, no."

Doing their homework

I recently was invited to participate in a DC tax policy forum discussing the Clinton and Obama tax plans. I couldn't go, but I gather that the Clinton people had thought I might be a good person to discuss Obama's tax plan. This in turn is interesting, because many months ago (well before even the Iowa caucuses) I had a blog post that was critical of Obama's then-newly announced proposals. So I suppose the suggestion may in this sense be no coincidence.

As it happens, I haven't posted on any other candidate's tax plans other than ol' Fred Thompson (you know, the actor) along with some snark concerning this now-forgotten guy who used to be a big shot, I think named Rudy Guiliano or Guilianus or something like that (it's hard to remember these days).

I've been thus scattershot about the candidates' tax plans because I find it hard to really take an interest in these things until I have reason to believe that the candidate is actually going to (a) win and (b) propose his or her plan. Plus, I sometimes have an aversion to overly low-hanging fruit, which is what criticizing a candidate's tax plan can amount to given all the political constraints on proposing sensible tax policies. So in a way it was a compliment, albeit less to Obama himself than to his economic advisor Austan Goolsbee, that I considered the plan worth criticizing.

Anyway, someone's campaign must be reading these things given the apparent genesis of the invitation. Good to know I'm not all alone out here.

Work, publication, and reading update

One work-related item that I did have to take care of in Mexico was the exploding offer (mentioned in an earlier post) for my article on taxable and accounting income. The offer was from the Georgetown Law Journal, and after very minimal efforts to stir up a couple of expedited reviews I decided to accept. A perfectly good placement, and no reason I could see, especially while on vacation, to play silly games aimed at raising the prestige factor slightly.

OK, I'll fess up to the one other bit of work I did, which was to plan (at a basic conceptual level) my remarks at the NYU Tax Policy Colloquium this Thursday, where we will discuss "How Americans Think About Taxes: Public Opinion and the American Fiscal State," a forthcoming (Princeton University Press) book excerpt by Andrea Louise Campbell of MIT's Political Science Department. I like the excerpt, which discusses why tax politics has moved recently in a less progressive direction despite the arguable financial self-interest to the contrary of non-rich American voters. Campbell uses, among other inputs, detailed polling data over several decades and a sophisticated theory of perceived cost-benefit from tax rules. Naturally, given my work and interests, this is a topic on which I have plenty of my own ideas. I anticipate a fruitful discussion.

I also found the time to read 4 books. (Reading fast is a bloody nightmare when it comes to packing for a vacation trip - you end up with plenty of bulk and still have to worry about running out.) First was "Zhou En-Lai: The Last Perfect Revolutionary." This perhaps unlikely bit of beach reading is a book written by a Chinese exile and U.S. emigre who for years had access to top secret Chinese Communist Party files from the 1960s and 1970s. After a slow start it became fascinating and even genuinely moving, showing how Zhou worked with the utterly mad and monstrous Mao, trying above all to survive and also to moderate him but also enabling him. The book reaches the conclusion that Zhou tried to be a decent person but failed because of the demands the system placed on him plus his own human failings such as the need to subordinate himself and comply. Extra points for satisfying the curiosity of one who grew up reading the crazy news from China in the Cultural Revolution era without having any information (which no one in the West had) about what was really going on behind the scenes. E.g., what was the deal with Mao's "closest comrade in arms," Lin Biao? Now I know, and it's a much more interesting story than I had expected.

Second book was "Smile When You're Lying: Confessions of a Rogue Travel Writer" by Chuck Thompson, an at times uproarious collection of travel experiences packaged as an expose of all the fakery and hype in the travel industry. Good not so clean fun.

Third was "Mayflower," by Nathaniel Philbrick, a history of the Plymouth Bay and related settlements from founding through the horrific Indian wars of the 1670s. Guess who were clearly the bad guys. A good read but not in my view great.
Finally, Joshua Ferris, "Then We Came to the End," the only novel I have yet read that is written in the first person plural (a shifting "we" that is one of the strong points). It's set in a yuppie (and otherwise)-filled ad agency and shifts gradually from satire to a bid for something, in the author's view, more. Agreed, the pure satiric take would have risked being very over-familiar after all the TV and other such treatments of same. And anger at the workplace or the bosses (shared by many of the workers in the novel, but not by the author) would have been tedious as well. I did like it, and found it absorbing, but in the end it was perhaps a bit too book-groupish rather than memorable. Reading Ian McEwan (such as "On Chesil Beach"), when one can stand to, can make a lot of other mainstream contemporary fiction look a bit thin.

Back from vacation

We returned yesterday from a week in the Iberostar Tucan in Playa del Carmen, Mexico (near Cancun but much quieter). A pleasant week on a family resort that mixed the idyllic with, I suppose, the tired (such as some of the all-you-can-eat buffets). At my age, the real good news is avoiding injury (from sunburn, being smashed by waves, testing my elbow tendonitis, etc.) and not gaining weight despite the all-you-can-eat system. As Oscar Wilde said, "I can resist anything except temptation," but luckily the desserts and fried foods don't even tempt me any more. The enormous quantities of fresh papaya that I consumed apparently were okay.

One of the Iberostar's best features is the wildlife living on the property - howler monkeys that I got to see daily after stumbling on their PM hangout site in the canopy, big iguanas, peculiar rodents that might be capybaras, and some beautiful though exceptionally pompous peacocks that were strutting around the pathways and in one case decided to challenge me. (I held my ground, figuring that I weigh more.) Best activity was letting waves wash me onto a surfbreaking structure resembling rock but actually a canvas filled with sand. Very slippery in spots where algae had grown onto it.

In the picture here I'm in the background, having ridden a wave onto the structure but not having yet been washed off. (This apparently was the day I decided not to stand up any more before the waves got me - there's only so much pounding you can take at age 50 plus.)









Second picture is one of the local beastie residents whose favorite AM sunning site we discovered. You can see that he or she is sitting on top of another iguana's tail.














Today (Sunday), things are not quite so idyllic. I'm in my office reading literally hundreds of pages for work (appointments committee, etc.) that I decided not to trouble myself with while in Mexico. Or rather, I am finding a way not to read them at the moment.

Ouch

Well I'm glad on balance, but I got a law review exploding offer (96 hours) for my tax and accounting piece, less than 12 hours before I'm scheduled to leave for the airport.  Managing this from a beach resort while trying to unwind is going to be interesting.

Tax policy colloquium on EC tax policy

Yesterday in the Tax Policy Colloquium, in our 9th of 14th sessions and the last before our one-week spring break (which I will blissfully spend in warmer climes), Ruth Mason presented her paper, "Made in America for European Taxation: The Internal Consistency Test." A lively session, in part because our usual crowd was supplemented by a number of high-spirited EC tax folk who were in town for a conference on EC tax policy that is taking place at NYU today, and indeed at this very moment.

Ruth proposes a Kantian-sounding (but not actually Kantian) diagnostic for tax discrimination, which the European Court of Justice (ECJ) has a mission to strike down while permitting mere "disparity." She would have the ECJ ask whether cross-border activity or those engaging in it would be disadvantaged if the tax law of the jurisdiction that is being challenged were universalized, i.e., adopted to the last comma by all other jurisdictions. It's a proposed diagnostic rather than a proposed standard, because one could analogize it to the skin test for tuberculosis - the question is whether one actually has tuberculosis, not whether one's skin swells where they inject you, but if it doesn't swell then you're home free whereas if it does you face further tests.

The key problem here is that, while we have an objective standard for tuberculosis (once all the facts are known, one unmistakably either has it or doesn't), the same cannot as easily be said for tax discrimination. What is it? Mihir Desai, my co-convenor for the last seven weeks of the colloquium, and I felt that one really needs to define it, at least conceptually, in order to have any sense of what one is trying to do, but lawyers who have spent less time with economists than I have often scoff at this and say no worries, we can proceed anyway. Definition, we don't need no stinkin' definition.

Mihir proposed an idea that Michael Graetz and Al Warren have also written about, to the effect that discrimination might be found if one violates either capital import neutrality (equal treatment of one's outbound investments with those in the source jurisdiction) or capital export neutrality (equal treatment of home and outbound investment). The punchline Michael and Al derive from this, and which Mihir suggested as well, is that tax discrimination, if defined this way, is a hopelessly incoherent concept. All taxes, home and abroad, would need to be harmonized if one wanted to fully satisfy both CIN and CEN, and this is not among the options on the table. The Europeans in the room loudly hooted at this interpretation of what they and the ECJ have in mind by tax discrimination - as I gather they also did in the past, on multiple occasions, when Graetz and Warren proposed this view.

Luckily for me (since I have to make some comments later today at the EC Tax Policy conference here), I felt that the session eventually helped me to understand what they appear to have in mind when they discuss tax discrimination. Very roughly speaking, and falling short of an operational definition, I'd say the idea is (a) negative cross-border tax synergies, or higher total taxes from being in two jurisdictions than one would have had from the sum of being separately in each, that (b) are not considered justifiable all things considered (e.g., considering how bad the impact is, how deliberate it seems to be, how easily the government could have avoided it without being forced to change rules that it might like for "innocent" reasons, etc.).

Not very crisp, and I don't have the time pre-vacation to try to spell it out more, but for me at least this helps conceptually. Seen this way, the idea isn't incoherent, although it is a bit mushy, underspecified, and vague. And not necessarily a bad idea to have courts doing this in an ECJ-type or US national setting.

Musical update

Stephen Malkmus' new album sounds at times a bit like the Allman Brothers. All those long hippie guitar rave-ups, albeit on songs that have characteristic Malkmus chord sequences and start-stop dynamics. I'm quite enjoying it, although the analogy isn't entirely praise. The best song, "Out of Reaches," could have been a Pavement ballad. (Now that's higher praise.)

Ray Davies' new album is really good. Probably his best album of new material since Arthur (with the Kinks) back in 1969, although this is not as high praise as it may sound as there are few intervening contenders. The Kinks, after having extraordinary self-direction and integrity in the mid-1960s, when they paid a price for not trying to fit in, spent the next couple of decades being as crassly and reductively commercial as one could possibly be. Plus Ray got too boringly bitter. The current album has a few overly preachy political moments, but overall it's a bit as if Lennon had lived, mellowed, and rediscovered a voice that could work for him.

The new Dengue Fever album is very enjoyable and lively. Not sure if I will want more of their work, but the fusion definitely works.